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Nortel says asset auction to go ahead

Research In Motion Ltd. may still have a window of opportunity to buy a piece of Nortel Networks Corp.'s wireless business – a gamble that could help the BlackBerry-maker gain an edge over such rising wireless stars as Apple Inc. But Nortel insists RIM must play by the rules.

By Chris SorensenMark HeinzlBusiness Reporters

Thu., July 23, 2009

Research In Motion Ltd. may still have a window of opportunity to buy a piece of Nortel Networks Corp.'s wireless business – a gamble that could help the BlackBerry-maker gain an edge over such rising wireless stars as Apple Inc. But Nortel insists RIM must play by the rules.

Nortel, operating under bankruptcy protection since January, said yesterday that it has "reviewed the circumstances related to RIM," along with its court-appointed monitor, creditors and bondholders – and has determined that RIM won't be given special treatment when it comes to a court-supervised auction of its wireless business. RIM has accused Nortel of shutting it out of the process, unless it agreed to refrain from bidding on other assets.

But Nortel responded by chiding the Waterloo-based tech giant for not adhering to the auction's strict procedures, saying it had unsuccessfully attempted to work with RIM on "acceptable confidentiality terms relating to Nortel's valuable intellectual property assets."

It also said talks with RIM about a "related transaction" had been put "on hold," without going into further detail.

But while Nortel said it planned to go ahead with the auction tomorrow, it seemed to be leaving the door open for an 11th-hour overture from RIM.

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"Nortel will assess all bids received to determine if they are qualified pursuant to the court-approved bidding procedures, and will then privately inform bidders of their bid status prior to the auction," Nortel said in statement earlier yesterday.

RIM, which said late Tuesday that it hadn't given up its pursuit, did not respond to calls seeking comment.

Swedish telecom equipment maker Ericsson said today it is also bidding for Nortel's wireless unit, but it declined to confirm reports its price was $730 million (US).

RIM, by contrast, had said it was prepared to bid up to $1.1 billion for Nortel's wireless unit, which sells network equipment to wireless carriers, and other undisclosed assets.

Observers suggested that RIM shouldn't be counted out just yet.

"There's a lot of time between now and Friday," said Steve Howse, an adjunct professor at McMaster University's DeGroote School of Business.

"I think (RIM's) position before the court will be that they're willing to put forward a very attractive offer.

"And the court is under pressure to do what's in the best interest of creditors."

RIM surprised analysts and observers earlier this week when it emerged as a potential buyer of Nortel's assets, and accused the once high-flying maker of telecom gear of mismanaging the sale process.

Howse said Nortel was likely hoping to sell off the bulk of its wireless equipment business, while retaining patents on potentially valuable future wireless technologies dubbed LTE, or long term evolution, but that RIM appears keen on buying everything in one swoop.

Although Nortel's network equipment business isn't an obvious fit for RIM, some observers suggested that RIM is trying to stay a step ahead of industry newcomers such as Apple and Google Inc. in the ballooning smartphone segment.

Carmi Levy, the senior vice-president of strategic consulting for AR Communications Inc., said RIM could gain an edge by becoming a one-stop shop for next-generation wireless products and services, selling everything from handsets to the equipment needed to run high-speed, mobile broadband networks.

"It provides a high level of integration for the carrier and it provides an opportunity to block other competitors like Apple," Levy said.

Duncan Stewart, director of research at Toronto-based technology consultancy DSAM, said the battle over Nortel may be motivated in part by valuable tax losses, which could significantly minimize future liabilities for a profitable company such as RIM.

While RIM co-chief executive Jim Balsillie has suggested there could be national security implications if Nortel's assets are sold to foreign buyers, Industry Minister Tony Clement has so far declined to get directly involved in the process.

Sources familiar with the bidding process said that if RIM fails to reach a deal with Nortel prior to auction, it could still have a chance to press its case during a Delaware bankruptcy court hearing that's scheduled for early next week.

With files from Reuters

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